Musalem says Fed likely needs more rate hikes to curb inflation
Fed Vice Chair Musalem warns inflation could stay well above 2% without further policy restraint
Published
Federal Reserve Vice Chair Alberto Musalem said further interest rate hikes are likely needed to bring inflation back to target. He said that without additional policy restraint, inflation is more likely to remain substantially above the Fed's 2% goal 18 months from now.
Musalem described the current inflation pressure as both demand- and supply-driven, a distinction that shapes how much more tightening he believes is necessary.
His remarks follow recent comments from other Fed officials. Goolsbee has said the Fed's own projections may not be enough to tame inflation if it is being driven mainly by demand, and has said a rate hike would not undo the rate cuts made in 2025. Schmid has backed a rate hike with inflation running above 3%, while also saying the labor market appears balanced despite that inflation rate.
Gold held near $4,375 on Sunday as traders weighed the Fed's next move following its first rate hike since 2023.
Musalem's comments reinforce the hawkish tone that followed that rate hike and the Fed's latest dot plot, suggesting policymakers see little room to pause even as President Trump calls for cuts and markets press for easier policy. The focus on demand-driven inflation and the prospect of further hikes keeps rate expectations elevated, a stance that continues to weigh on stocks and gold while supporting the dollar and leaving the recent stabilization in markets fragile.